Operations Buzz

In Conversation: ProLogis’ K. Dane Brooksher

January 28th, 2010

In this edition of the Thought Leadership Project, I talk to K. Dane Brooksher who recently retired as the CEO and Chairman of Prologis. ProLogis is a leading global provider of distribution facilities, with more than 475 million square feet of industrial space in markets all across North America, Europe and Asia.

He talks about leadership, challenges of growing and going global, operations and sustainability.

About K. Dane Brooksher

K. Dane Brooksher is Retired Chairman and CEO of ProLogis, a leading provider of distribution services and facilities. Mr. Brooksher began his career with ProLogis in 1993 and during that time held the positions of Chairman of the Board, Chief Operating Officer (COO), Co- Chairman and CEO. Prior to joining ProLogis, he spent over 32 years with KPMG LLP, serving as the managing partner for the Mid-West area and the Chicago office, as well as serving on the firm’s Board of Directors, Management Committee and as International Development Partner. Mr. Brooksher is currently a director of Qwest Communications International, Inc., a publicly traded telecommunications firm and Pactiv Corporation, a publicly traded consumer goods and food products packaging firm.

The conversation

This is a condensed version of Prof. Ram Ganeshan’s (RG) interview with K. Dane Brooksher (DB).

RG: Tell us about your leadership style. What was your leadership style and how did it evolve in the course of your tenure at ProLogis?

DB: When I went to ProLogis, it was a start up. In the early years by and large I did everything. I was the CEO, the chief financial officer and the human resource person. I even did all the hiring and firing.

As we grew larger, my leadership style evolved over the years into one of what I call team leadership, and to being the leader of the team. You are the quarterback of the team. And recognizing that we had great people with great ideas, all we needed to do was pull them together. We got everybody on the same page once we decided which direction we wanted to take and the play we wanted to call.

RG: What were the challenges, as you grew bigger?

DB: Initially the idea was to start a real estate company whose focus was not on the real estate but on the customer, the tenant. Our goal was to build a company that was based upon relationships with customers on a long-term basis as opposed to the normal transaction-based real estate mindset.

It’s not unlike a professional service firm where you have a client and you do something for that client all the time. That was the real challenge, to hire real estate people and then convert them to this culture. This probably was the biggest challenge of putting the company together because if you weren’t able to do this you weren’t able to achieve the vision that you had for the company.

RG: How did you solve the customer side of the riddle? Why were they willing to sign up with a small start up at least in the early years?

DB: If a customer — even large ones like Home Depot or General Electric, or Ford — wanted one distribution center in Reno, Nevada and another in Chicago, the only option they had was to send their people to Reno and find out who the developers were to execute or lease them or build them the base that they wanted. Then they had to go to Chicago and do it all over again. So ProLogis was put together to solve that problem as well for the customer.

RG: And you were able to do it a lot cheaper and a lot more efficiently than they could do it themselves.

DB: Right. We also had to convince the customer that this model would work for them and that it would be cost effective because they could call us up and say we want a distribution center in Reno, one in Chicago and negotiate the whole thing with us for both of them.

RG: How do you manage supply? I am assuming in this case it is land you have acquired?

DB: At the same time that you’re assessing your customer’s needs, you have already acquired land and entitled that land and you will also probably take part of it and go ahead and put up a distribution center that is not leased in anticipation of the growing needs of your customer base in the local market.

DB: That’s exactly right. In fact that’s what we called it — inventory development rather than spec development. We tried to change all the language that real estate people were using. They would refer to that as spec building and we referred to it as inventory.

RG: And how ahead of the customer demand were you, I mean were you ever caught in a…

DB: Oh yes, that’s part of the risk of the business but if you limited your inventory – and that’s an art, not a science – depending on the market and the economy at the time and the number of inquiries. You had a lot of measurements that you monitored.

RG: About five or six years ago you also diversified into providing some consulting services for your customers.

DB: Part of what we wanted to do was also be known as the go-to company to assist your customers in analyzing the most efficient and cost effective way to put together or change distribution systems based on the changes in their products and regulations, laws, the whole gambit of the things you teach in your supply chain class.

RG: What sorts of trends were you noticing on a macro level, are firms using less distribution centers or more or were they trying to move products faster?

DB: I would answer by first saying thing that it’s always changing. And one shoe does not fit all. So we’d have a customer say in health care that was providing hospitals and medical centers with various supplies. They needed to be very close to their customer so they would probably put together a distribution center that was small but was very close to their customer base in that particular area.

RG: So a quick response was their goal.

DB: Asopposed to say again, Home Depot, their distribution centers were going to have a lot of products and big products as well as small products – refrigerators, lumber, whatever it might be. So they needed a lot bigger distribution center but the products weren’t critical to be there the next day necessarily so they would opt for a hub and spoke system. So they’d have five hundred thousand to a million foot square distribution center that may serve a lot of stores.

RG: What prompted you to go global? What were the challenges?

DB: That was again customer driven. Customers would say “Hey you’re doing a good job for us in the United States and we’re having all kinds of trouble in Mexico, and any chance you’d be interested in going down there and starting this out for us?” And that’s how it started.

We went to Mexico, we went to Europe, went to Asia and we just simply used a philosophy of following the customer.

Every country’s got their own laws and they’ve got their own way of looking at real estate development regardless of what the deal is. So you had to understand all that and to understand all that you couldn’t be sending an expat over to do it. You had to hire local people and that was how we built the business.

RG: Environmental stewardship and sustainability is now a huge part of the company. What are your general opinions on that and what should businesses be doing?

DB: I think you should do everything to minimize the impact on the environment with your business. Environmental stewardship by reducing our carbon footprint and reducing dependence on fossil fuels is one aspect. Corporate social responsibility –demanding high standards of societal conduct by everybody involved is another aspect.

We, as a company and as individuals, must continue to minimize our impact on this planet for the benefit of the people that have not yet inhabited this planet.

So we do it for sustainability, social responsibility, but generally speaking, also for our customers. Our major customers are concerned about the same things and they’re always looking to do business with who share the same values.

About Prologis

ProLogis is a leading global provider of distribution facilities, with more than 475 million square feet (44 million square meters) of industrial space in markets all across North America, Europe and Asia.

ProLogis leases industrial space to manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises with large-scale distribution needs. Headquartered in Denver, Colorado USA, ProLogis is a FORTUNE 500 company and a member of the S&P 500.